The Following Are Two Unrelated Situations

question 11

Essay

The following are two unrelated situations.For each situation,outline possible deviations (if any)from an unmodified auditor's report that may be necessary and give reasons.State your assumptions.A)Queen Lake Construction Ltd.uses an aggressive revenue recognition policy under the percentage of completion method for long-term construction contracts.Your review of this year's contracts indicates that several projects look as if they will be high in revenue for the first two years and then have negligible earnings for the next three years.B)Maple Manufacturing Limited constructs furniture out of maple wood.The furniture is prized for its durability and craftsmanship.Last year,the company received a letter from a government agency advising that it had been found that Maple's factory was located on contaminated land that leached hazardous chemicals into the air.This was a preliminary letter stating that a full investigation into the health effects was underway.Management has stated that everything is okay and the investigation was terminated.However,the lawyer refused to sign the legal letter with respect to several lawsuits regarding employee claims for long-term disability due to a nervous disorder that affected employees' ability to work.Neither the investigation nor the lawsuits are disclosed in the notes to the financial statements.

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Definitions:

Self-Actualization

The realization or fulfilment of one's talents and potentialities, considered as a drive or need present in everyone.

Gestalt Psychologist

A psychologist who studies how people perceive and process information as whole forms rather than as separate component parts, emphasizing the context and patterns in learning and perception.

Physiological Needs

Basic physical requirements for human survival, such as food, water, and shelter.

Trait Theory

A psychological approach that attempts to study personality through the identification and analysis of consistent patterns of behavior and thought.